Hey Kevin If I have 2 million in my Trust account at RBC can I withdraw around 100 K a year since at my age 70 i have around another 15 or some more years since life expectancy is 85?
I retired last June. I have a Rollover IRA, a Roth IRA and a taxable brokerage account. I've been living off of my taxable brokerage account, which I expect to do until I collect Social Security. I'm also doing Roth conversions this year, filling up the 10% and 12% tax brackets. I've done about $30,000 in conversions so far this year and will wait to see what room I might have left at the end of the year. I'd like to avoid pushing my LTCG into the 15% bracket. We shall see.
Invest judiciously, keep a stop loss figure. Shuffle between debt and equity wherever the ratio goes too off your target. As for the target, I recommend a Ratio like this Debt % should be equal to your age in years. If you are 20, debt is 20%, reset in equity. If the market falls or rises drastically, your debt % will change, which you should rebalance to 20% and bring back equity to 80%. Thus you would have bought low or booked profit depending on if it was a crash or a bull run.
Effective personal finance management is more important than the amount of money saved, regardless of whether income is earned through job or investment. Individuals can seek counsel from a certified financial advisor to optimize financial outcomes, who can provide specialized advice and methods to decrease expenses and maximize income.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
@@Jeffcraparo This is really nice. I worry that I have a couple more years before retirement, and I want to switch to using a financial advisor, I could really use the expertise of this advsors.
One of the most well-known people in her field is my CFA, Annette Marie Holt. I advise doing more study on her qualifications. She is a great resource for anybody trying to understand the financial industry because of her many years of expertise.
I have been retired for five years now. Although I've been adhering to the 4% rule, things are challenging as I did not anticipate. 30% of the $600K I invested in st0cks is lost to the market. How can I diversify my portfolio for retirement
Now you are retired and depend on your investment, it’s best you redistribute your capital. To simplify the process, you could allocate your resources with the help of a financial advisor.
I wish I could have retired in my 50's. I'm 65 now, I started investing late . After some research, I found a strategy that helped. I'm pleased to say I'm retiring with at least $2 million.
The most common investment portfolio strategies include diversification, where you spread investments across different asset classes to manage risk. Another is the growth strategy, focused on capital appreciation through high-risk, high-reward assets. Income-oriented strategies target regular income from dividend stocks or bonds. There's also the value strategy, seeking undervalued assets for potential long-term gains.
My portfolio was diversified across several markets with the help of a financial planner, and were able to achieve over half a mil in net profit. It is vital that you have a variety of exposure, including in firms that are currently generating cash flows.
‘Grace Lorraine Austin’, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
My portfolio is diversified across several sectors, thanks to a financial advisor. With their expertise, I’ve achieved over $500,000 in net profits. Having exposure to cash-flow-positive companies is crucial for long-term success.
The time it takes to turn $500,000 into $1 million depends on your investment strategy and the rate of return. . If you put it in a high-yield savings account you'd earn $100,000 per month with a good financior planner. However, if you invest it in the stock market, which has historically returned , you could potentially make around $250,000 per month still depending on your market and risk taking strategy. So you need a good investment plan to earn well for a short period of time.
Amazing question, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
@@SamsonsRhodesas I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second daughter. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks...
Taking break may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. A licensed adviser whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help...
Taking break may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. A licensed adviser whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help
A friend died last month at 64 and collected $0 from retirement and SSN. Never retired. Always seems questionable to miss out on 10 years SSN as you bet you’ll live to 70. My wife died at 50. Neither of my parents lived past 65. We don’t all live forever. I understand there’s math involved but seems that using SSN earlier uses “other people’s money” such as the governments payments to you v drawing down more of you so called own money in your retirement accounts. Though it’s clear it’s not “your money” because unless you spend it all you never use what you saved all your life - it’s for your heirs then.
I thought about how to reply to your comment, but couldn’t figure out how to say in a brief way. So, I’ll leave you with some of my own thoughts/experiences and hope that all who read them will balance what is in their best interests. I to had a friend who passed away a year before retirement and never got to see a penny. I also lost my high school sweetheart, who was killed at 16 years old and before she could save a penny. I also had a grandmother who lived to 101. So, I guess as is good prudence with many things. Hope for the best, plan for the worst. Or; live for today, but not at the expense of tomorrow. Best wishes.
I agree on this. Social Security is use it or loose it. If you wait and don't take it you aren't going to be leaving it to someone to inherit like other payment sources. There is a break even age and other assets will continue to grow if you are taking and using Social Security instead of drawing from them.
The ROTH is the last thing you should draw from in my opinion. The money you take out is tax free, yes, BUT once it is out of the account it can no longer be returned, and that money was _earning_ money (presumably) which would have been tax free.
@@Dividendsmattertoo Or, you can reinvest the dividends within the ROTH and the profits that result will also be tax free. Once dividends are taken out, though what is taken out CAN be reinvested outside the ROTH, the proceeds will be taxable. If one absolutely needs the dividends then by all means take it, but if not keeping it in is a no-brainer.
Thanks, Kevin, for covering this information & especially for making your software available. I’m a retired MD,but know *nothing* about making good decisions regarding retirement. I will spend the remainder of the weekend viewing & learning from your videos & software. I was a pediatrician, the lowest paid MD, so my portfolio is quite modest. Consequently, I need all the help I can get! Thanks for educating this OG.
We opted to draw from our regular investment account first. We retired at 62 and were relying on ACA provisions for health insurance. By using our regular investment account it kept our Modified Adjusted Gross Income (MAGI) low. As a result our health insurance was highly subsidized and we had zero taxes. We figure we avoided close to $10k a year in health insurance and tax expenses for 3 years. We started income streams at age 65 in conjunction with Medicare coverage. We also made Roth conversions up to bracket creep starting at age 65 and will continue to do so until RMD age. These are the only transactions we've conducted with our IRAs.
I have wondered for many years, why it is that the American education system hasn't or doesn't teach finances, especially, early on (elementary school) and continued throughout HS. This is great info and if I may add, a great read is the (any) story about Alexander Hamilton and his story relating to treasury/financial system. An eye opener!
My high school teaches financial literacy. Unfortunately a socialist teaches the course. I’ve spoken up many times about it but I’m talking to myself. Public education is a train wreck.
There sems to be a focus here on minimizing the taxes rather than maximizing the after- tax wealth. The latter is to be preferred. It becomes rather complicated when considering the fact that wealth is inheritable and for some accounts you must consider your life expectancy and the tax rates of those inheriting your wealth.
I think you missed the boat on someone who retires early. I retired at 61 1/2. I have 3 1/2 yrs until i can go on medicare. Healthcare is the number 1 thing i will not skimp on. Going through the ACA plans, the subsidies are tied to your gross income, this also includes your spouse. In order to get a decent policy under $500/month we had to cap our income at 40 grand. That means no roth conversions, no ira withdrawls. I planned this a few years ahead and stock piled enough cash to pay bills for 3 1/2 years. So, sometimes one does not really have a choice. Btw, the policy without subsidies was $1325/month. I also waited to retire until my wife hit 65 and went on medicare. She has a cancer history which is a whole other ball of wax.
My spouse and I decided to retire at 62. We knew we would incur an income monthly loss of $1000. We also knew we had to bridge our health insurance for 3 years. The ACA ( Obama Care) came to the rescue and so did Trump ( bless his heart). We had IRA's totally $600,000. Are income at retirement decreased from $110,000 to $45,000. We were not married at the time we retired. The ACA premium is based on individual income. Our premiums for the ACA was $75 monthly for me and $50 monthly for my partner. Then Trump was elected and his first act was eliminating the tax subsidy. By doing so, another subsidy kicked in..resulting in my premium falling to $50 monthly and my partner's to $25. Total coverage with a max out of pocket of $1700. Bless Trump's little heart. Lol Anyway ..65 arrived ..partner and I celebrated our 25th anniversary by joining hands in marriage. We were met with Medicare..after contributing to Medicare since age of 18..Medicare premium was $165 monthly plus another $35 monthly for supplemental coverage. And out of pocket cost soared to $4000. EACH. Long story short..our $600,000 is invested in a 6% government agency bond (.not callable for 6 months) we have always lived within our means. Home is mortgage free and any credit card debt to choose to carry is always with a zero interest card. . We will have to begin RMD at age 72. The withdraw will simply be transferred to our joint non IRA account. One thing I noticed...when we withdrew $15 000 to cover cost of a new home ..our tax return for that year was zero..for both state and fed.
@johnemanuele8695 At least you weren't forced to take a covid vaccine like I had to or lose your job under Biden (bless his new world order heart) remember they told you the vaccine will keep you from spreading covid and getting sick? Shut the economy down too. At least Trump (bless his 2nd term president November heart) let me dip into my 401k up to 100k.
@@johnemanuele8695Uh, pretty sure Biden, bless his heart, raised the RMD age to 75. And Trump AND the Republicans tried to do away with Obamacare completely, except for the courage of John McCain, bless his heart! Now, if Project 2025 is allowed to be implemented, Trump elected that is, the Project 2025 stated goals is to do away with Medicare all together, and cut Social Security. Be careful what you wish for.
Current plan is to delay SS until 70 (longevity genes) and draw down/Roth convert from pretax from age 66 to 72, to reduce RMDs. Currently don't have any post tax $ beyond some operating cash for the next 6 months spending, but plan to sell a house soon. After RMD starts, plan to use Roth and brokerage whenever spending needs or wants go above what's prudent where tax brackets and IRMAA are concerned.
We pull from tax deferred accounts until we hit the spot where the 2nd level of IRRMA kicks in and then we pull the rest from ROTHs since that extra 4% the 2nd level of IRRMA cost essentially gives us 4% more on the ROTH. Not pulling a lot from the ROTH, but some.
I have dreamed of making more than $200,000 in income all my life and would not care getting hit with high tax rate but that dream never comes true, now that I have a chance in retirement to make that dream comes true without even working that is already a pretty good deal. I will just sleep through this tax issues and enjoy life then when I have time and I may do something about it with the information provided here, thank you Kevin
if you retire early you will need healthcare and the cap gains impact your aca magi income and hence your subsidy. fidelity offers a tax managed account the washes the gains out of the portfolio while tracking an index...helpful for income planning with regard to aca magi...healthcare cost is a huge factor when retiring early....
Perfect topic. I'm 3 years in retirement @57, did a good job in the accumulation phase with net worth of $3M+. The problem is I haven't spent any of it despite knowing I have no concerns of running out of money. Some minimalist traits that helped me save are not easily cast aside. I sense I'll be dead and gone with plenty of money left behind, but that was never a goal.
It is hard to make the transition to withdrawing savings you’ve spent your working life accumulating. I’ve been retired 7 years and have withdrawn little, worked part time on and off (dont need to), and continue to grow the nest egg. 🤷♂️
@RicardaWindsheimermy financial advisor says this is very common with her clients: They are frugal, don’t travel a lot and enjoy where they live. Shifting into “ enjoying” some of the money is something they have to give themselves permission to do.
Been using taxable accounts since I retired early. This will continue until I hit the RMD age. Then RMDs will exceed living expenses. Roths will likely never be touched. Will claim SS at 70. So between SS, small pension, and RMD, I am fine.
Use your Roths for major purchases (paying cash for a new car, a second home, etc.). This way you avoid selling from taxable accounts and driving up your taxable income.
I would withdraw from the tax deferred account first to fill up the 12% tax bracket every year, then the taxable account then the tax free account last if at all.
Dad made sure to position things such that he got less in his lifetime but left mom in a position of getting more of social. She out lived him by almost 21 years. It’s not me I’m worried about, it’s my fiancée. So will make sure I can get by until she gets a better benefit.
Interesting, but the figures are so far above where I think we will be that it lost relevance and I started tuning out. Perhaps you could do one like this for the common worker.
Absolutely correct, but he is a certified financial planner, so generally the only people he deals with are people with money. I would venture to guess that he spends no time with someone that works at the local hardware store, who lives hand to mouth just hoping to reach full retirement to draw Social Security benefits that we are now hearing may be reduced by 20% to 30% beginning in 2033 because congress and the government is more interested in funding their war machine, and their pet projects than they are the livelihood and security of senior citizens that have paid into the system their entire working life.
It is very complicated in retirement planning especially most of us aren't good in math. I am gonna try to the software you provide here and hope I can get some advice out of it. Thanks for sharing this tool.
I came across your channel through this video-case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.
Maybe I heard wrong, but around 7:10, I thought it was mentioned that if you put $20k into a 401k or 403b, it reduces your taxes by $20k. I believe it was meant to say that if you earn $70K a year, and you put $20K into your 401k or 403b, that your federal taxable wages are reduced by $20K and the fed taxes are calculated on the $50K. FICA I don't believe is affected by this. I could be wrong on what I heard.
Every time I lose or quit a full-time job, I always roll the money from the 401k to the appropriate brokerage account. I'm planning on pulling from tax-deferred first and only pulling when market conditions are good. The money would either go into a taxable brokerage account and/or a high-yield savings account to make safe interest. I would pull enough to cover 3 years worth of expenses. This should nearly eliminate sequence of returns risk (I hope). Then when that money runs out, I finally pull from the Roth.
@@cindyhenry1410Yes, if you withdraw before being eligible you are fined and taxed at existing rates. Rule of 55 can be used to withdraw earlier though, but it has catches. I think the original comment meant he was rolling over employer tax deferred accounts when he changed jobs.
Why defer SS till 70 years old? Doesn't make sense with median death age is 73.4 years for a male. What is the best prorate sequence of withdrawal if SS is taken at 62 years and not left on the table unused? All tax and retirement advisors have convinced themselves their clients will never die.
If the male is healthy, it probably makes sense to wait until 70. Basically insurance incase he lives longer than he expects, as many people do. Perhaps I'm more conservative with my money, but I'd rather have extra available incase I live longer, and if I die at 71, then another guy who lived until 91 can have it.
So half the men live longer than 73.4. With a solid number living way longer than 73.4. Assess based on your own situation, but median age of death is a very limited stat to make this decision on.
Very informative. Thanks for sharing. After a month of learning, I'm glad that I am able to understand the relating threads. Managing personal finance is rewarding.
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remember that you can't take the money with you and you only have so many quality days on earth. retire as soon as you can make ends meet and NOT until the money looks better later. As soon as you can make ends meet, unless you like working then by all means keep working because you are funding my retirement (social security part) while your NOT draining it. people who work until they die are my heros
@@toddmaniatoddmania9844 Why not both? I am not a financial adviser, or a tax professional and this is not financial or tax advice. My experience is that maxing my 401k was one of the larger mistakes I made. Here's what I wish I had done; 1) invest up to the company match in my 401k 2) max out my roth 3) max out an HSA when I qualify. 4) Invest the rest in a standard brokerage account. (this assumes you are a buy and hold type of investor, and that you do NOT have a ROTH 401k available) Here's why; 1) The company match is worth the taxes you MIGHT have to pay. 2) ROTH is tax free at retirement, and can be used without penalties or taxes within limits before retirement. 3) You're gonna have health care expenses, and why not pay them tax free? 4) There is NO long term capital gains tax on your first $89,250 of GAINS PER YEAR (if you're married). This is MUCH better than a traditional 401k tax treatment. So, during retirement, I'd draw nearly 30k per year from my traditional 401k. This would be tax free because of standard exemptions. Then, I'd take out about 60k of GAINS from my brokerage account that would also be tax free. If needed, I'd pull additional money from my ROTH, and of course pay my medical with the HSA. This gives me a tax free income in excess of 100k per year if I've made good investments.
@@toddmaniatoddmania9844 Most 401K plans have a ROTH option. I max out my 401K contributions every year and it is all with after tax dollars going into ROTH account.
Everyone says that 401k is taxed like regular W2 income but you already paid FICA taxes so it’s not quite as bad as regular paychecks get taxed while working. Also, I may have missed it but you can have about $90k per year of long term capital gains as a couple before those are taxed. -update: you mentioned that at 12:27. 👍
The easy way to think about 401k taxes is just apply what your federal income tax bracket will be. If you are in the 12% bracket just deduct the standard deduction for single or married and tax the remaining amount you will withdraw from you 401k. Example: For 2023 standard deduction for single is $13,850 and $27,770 for married filing jointly. So assuming a $50k 401k withdrawal and filing jointly would be $50k - 27.7k, leaving $22.3k taxable. Now look up what tax bracket $22.3k falls under, which for 2023 is the 12% bracket. Tax would be $2,676 in 2023 on a $50k 401k withdrawal with no other tax deductions considered. So a withdrawal of $50k from your 401k in 2023 would net you $47,324 after federal taxes and no state income tax. Also, the current tax brackets and deductions are all set to sunset the end of 2025 and return to what they were previously. The only portion of the Trump tax cuts which will remain are the corporate/wealthy tax cut portions. For my example above that will mean the 12% bracket will be reverting to the 15% bracket with far less standard deductions and other deductions available. Or to put it simply, unless Congress extends the current tax laws taxes will be rising for individuals starting in 2026.
I love how much details are available nowadays for retirement planning and financial literacy in general. 13:45 is where my strategy would reside too. Taxable-Tax deferred and then Tax free accounts withdrawals. Love this detailed analysis!
@@bryan_witha_whyy so, how do you increase your buffer without selling off your shares? Where dividends come even if the market is up or down. Also, if you plan right and buy those shares that have good dividend growth your money will grow over time. My 3 uncles worked blue-collar jobs. All retired rich with good blue chip stocks that paid good dividends. They lived off the dividends way into retirement.
When I leave a job I have the 401K company rollover my 401k to a Traditional IRA. IMPORTANT I had NO CHECKS sent to me, it is the 401k company that sent the check to the brokerage company. I never saw or touched the money transfer for tax reasons. The 401k company charges yearly fees in addition to the mutual fund fees. Good brokerages only charge mutual fund fees. The company you worked for *MIGHT* have paid your 401k fees, but they probably won't pay after you leave the company. The only drawback is that I cannot be sued for any money in my 401k, but I can be sued for brokerage funds. So I don't do anything to get sued & have adequate Home Liability, Automobike and additional Umbrella Insurance.
You are missing out the fact that the dividends and interest from taxable account is taxable as regular income. That should be factored in while determining how much Roth conversion is possible.
Isn't that taxed a long-term capital gains (15%) if you've held for the required minimum number of yrs more (5 yrs?)? Your comment above applies if someone sells/withdraws before that.
I retired at 55 so I have access to my 403B without the 10# penalty. I take 50% from 403B and 50% from my brokerage account.. the last account I would touch is my Roth IRA
When retired, I won't be pulling $100,000 a year out of my 401 and get taxed 30%. Most people would be broke in 2 years or less. I'm in a 30% tax bracket while working and I will be in a 12% + or - tax bracket while retired. So to me, a 401, tax deferred and matched, is the best route.
Getting ready to retire with only taxes on my home insurance on my cars and electric bill and phone bill. I don’t understand these examples of 10k expenses a month
Investing has been rather rewarding to me and I've learned that getting a good return is very much attainable if you know your way around it. Do not let anyone tell you it’s impossible.
Luck is way off the picture. Jonas Herman, a licensed fiduciary is the brain behind my success. I've gotten into a plethora of assets with $21k spread across stocks (options and futures) for the short term and Roth IRA, index funds, cryptocurrency and ETFs, for the long term. Now with over 91k in roi, I sit back and just reinvest at intervals while I handle my other businesses.
Subscribed 🙂 I've downloaded and played with the tool (so thanks for that) and compared it to the Fidelity retirement calculator I've used the past 5 years or so. The tax (and Roth conversion) information in this tool is non-existent in the Fidelity tool ( my guess is on purpose) but their income and expense details are so much more comprehensive allowing you to add or change particular items and amounts on a year by year basis. Looks like I'll be using both tools now until I find the 'one tool to rule them all' (haha, sorry about the poor dad joke). I've been early retired (55) coming up on two years and am still trying to navigate the nuances of budgeting and optimization until my wife retires around the end of the year. I've watched about 3 or 4 of your video's and realize you're definitely in the top 3 of the dozen or so I've watched or seen over the years. Keep up the great content.
You didn't really give an answer, but it seems that best strategy would be to pull money from the IRA or 401K UP TO the point where it would kick you up a tax bracket and spread that out as far as possible. That tax bracket can eat up a LOT of what you will gain.
You sound very knowledgeable and strategic and this seems like sound advice. You also seem out of touch in terms of being relatable. The “typical” family does not have $1M saved for retirement. The “average” retiree does not collect $4K per month. Try cutting those numbers in half, and then some.
He is knowledgeable and strategic. And this IS sound advice. Not out of touch at all - these are from the people he works with who have funds and need to understand how to use them. Anyone with much less does not have too be as concerned because their taxable situation is far less problematic. I find it to be highly honest, and he is sharing terrific info. Know your audience. And also, audience: know your speaker.
@@kelleydonovan770 he used imprecice language ... you don't get a "deduction" for tax deferred contributions as it is not counted as income in the first place
Just a slight correction... Putting 20K into a 401K doesn't reduce taxes by 20K it reduces your taxable income by 20K (6:57). You probably meant this, but it didn't come out that way.
Thank you for a great video with the couple's examples. Of course, everyone situation is different, but this gives enough information to build a better financial future. I will be checking out your other videos to get a full understanding of getting ready for the dreaded RMDs . I will start with your software tool and see where I stand and work the process.
At around minute 12:45, in reality the tax brackets are adjusted yearly which allows retirees to take higher distributions without moving to a higher tax bracket. For example, a couple in 2023 filing jointly can withdraw up to $89,450 in taxable income (401k for example) and remain in the 12% tax rate whereas in 2024 they can take up to $94,300 (almost a 6% increase). I guess if I were retired today, I would strategically give myself and spouse a raise up to the IRS adjusted bracket only to avoid moving to the third tax bracket- 22%!
Why wouldn't you draw from your IRA first and reduce that account and in turn reduce the RMD required when you hit 73, then use your taxable, RMD's and SS to fund your retirement. It seems like anything you can do to reduce your RMD's will help later in retirement. I'd like to see those numbers.
Regarding the frequent discussion on at what age should you start taking social security, how do you take the more likely future reduction in payments resulting from no longer having a surplus in reserve, into a presentation format? As a recently retired accountant, I took this into account in my analysis and it changed the logical choice. Results will be impacted by what year, how much will the reduction be, and what possible regulation legislation will become the final rule.
$10k expenses per month? Whoa-- way too many expenses! Time to downsize. I don't think you are talking about regular people like myself. I'm a teacher and for sure I don't make that much.
@@foundryfinancial10k per month is not middle class, that is for certain. It amuses me that people like you think 10k per month is "average", coast or not.
I just saw sone other video showing breakeven period for starting social security benefit at age 62 vs age 70 . The breakeven age was 79 years. This surprises me that after age 80 you won’t be able to spend money with your health even if you have lot of money. With the crazy inflation, the breakeven period will even get pushed back. Considering average life expectancy of 83-84 years, it doesn’t make sense to push back social security benefit past age 65.
This is often the case. Most people don’t calculate break even which is a real mistake - I was an accounting professor and covered the importance of break even in my managerial accounting course. I think people get so worried that they will live beyond the average life expectancy, they get scared into delaying withdraw. I did a break even analysis for my pension plan and I would have to live to 90 before break even. It made it a no brainer to start taking it at 55.
The best thing to do is: retire with your pension, make sure that your house is paid off - along with the cars, go back and work in your field for fun money and nonessentials. Do not touch your TSA’s until 70. Never rely on social security- that is a bonus.
Not really explained why the order makes this difference, only that it does. In particular, the specific explanation of why Roth should be last is not a reason at all. The likely reason is that deferred accounts will have forced RMDs. I suspect that the speaker may not fully understand the reason too, which does not instill confidence at his advice.
Started working with the Right Capitol program, getting familiar with it by changing the inputs (as I dont know all the finance lingo). After several hours I have it matching fairly closely to my Excel workbook. Going to start working with adding Roth Conversions for the next two years and see what happens with my very low taxes..... It is a powerful tool, thanks for sharing.
@@foundryfinancial I clicked on the links but didn't get or see how to download the program. I did get an email, but no program. How do I get the program?
Dont wait to reduce your traditional IRA, convert or get the IRA lower before your get old. There are old age traps in a traditional IRA you cant afford.
The ACA is based on your gross income, so 🤦🏻♀️ I had to pay for it completely without subsidies. 🤷🏻♀️ What can you do? I decided I can afford it if I don’t buy anything except for groceries and decided to sell some stuff. So I went ahead and paid for it. Healthcare is too expensive to go without insurance.
What you can sometimes do is put as much as possible into a traditional IRA or 401k plan to reduce your taxable Income. I myself (self employed) set up a Solo 401k plan to contribute much more than the IRA contribution limit. It increased my ACA plan subsidy, as well as reduced my Silver plan deductible and co-pays.
In the example shown....the couple draws from a taxable LTG account....there are 2 other columns that show their qualified acct & tax free act gaining wealth.....what are those gains based on (average 5% stock market??) gains in any account are never guaranteed! Please comment on these accounts and their value....TYFS!
Kevin, the Right Capital tool has incorrect tax numbers. My scenario has me selling about 12% of my stocks annually which is obviously not sustainable itself. The sale created a large tax bill also.
One important take from this should be that if you wait to draw from your IRA until much later in retirement, you'll potentially be paying a much higher margin tax rate on those withdrawals. It may be better to rollover to Roth or draw as income IRA to avoid drawing funds from your taxable account that may have large unrealized capital gains. If you plan to pass on assets to heirs, that may be important. Also if you're in a community property state, one one spouse passes , there is a complete basis step up (as opposed to half in other states). Note that withdrawing IRA funds at x% tax rate is exactly the same as letting the assets grow tax free and then withdrawing at the same x% tax rate.
At 12:24 you've mentioned that married filers can pull out $100k per year fed tax free provided no other income is realized. Does this income include dividends from brokerage accounts and bank interest or only income from wages salaries and tips?
He answered another person's question regarding the $100k tax free. What he's talking about is their Taxable Income would be $100k less Standard Deduction of about $27.7k (below aged 65, 2023 amount). Taxable Income $72.3k. At that level, they're in a 12% tax bracket for ordinary income. But LTCG at that level are taxed at 0%. This doesn't apply if the $100k is wages or a Traditional IRA or 401k w/d. Those are taxed at Ordinary Income rate.
Hello @Kevin Lum - you mention at 12:30 that withdrawals from taxable account are free of capital gains tax up to 100k if there is no other income. Can you pl. share an article or site that explains this rule in more detail? Thank you
If you're in either the 10% or most of the 12% tax bracket for ordinary income purposes, the tax rate you pay on LTCG and Qualified Dividends is 0%. In simple terms, that a Single person with Taxable Income below about $44k or Married Couple below about $89k.
I don't have a gap. I only spend 30% of my fixed income and invest 70% but I also get interest income from bank CDs and RMDs that I use QCDs to negate.. I don't pay taxes Fed, State, and Property Taxes. I use my negative gap to make Roth conversions so I'm rapidly knocking the RMDs down. Over the next 5 years, my QCDs will be about the same as I give to charity anyway and I' will about halved my rollover IRA. After 5 years, I'll recalculate. The only downside is I have to do my taxes for 2024 as an estimate to manage my future tax liability (recheck Dec1) and also file my taxes for 2023 too. I do my own taxes.
Hi Kevin, great content as always! I am looking for the link of that tool you shared in the video but did not find. Could you please post the link again? Thank you.
I'm pulling 401k pretax first at age 55 with IRS rule of 55 to reduce RMDs and to have taxable income for Obamacare subsidies. My RMD age is 75 years old. I don't ever plan to spend a dime out of my Roth IRA, that's for my kid's inheritance, and that dumb secure act with 10 years of forced withdrawals.
Awsome, life is too short to retire in the 60s if it can be avoided. Retired at 50 several years ago, was going to take social security at 62 but factoring in RMDs at 75, probably use pretax accounts and delay social security as well. The more I learn, the more I earn 😂
I'm doing the same thing in a year. Spending it down to near zero, then living off some cash and real estate after that. Then Roth IRA if necessary. But the Roth is an "in case SHTF" fund and inheritance/gifting.
With a new administration coming in and many existing individual tax laws set to expire at the end of 2025, I think most of us in the industry expect to see new tax law passed in 2025.
Question: It looks like these examples empty one bucket at a time completely... If 401k growth withdrawals count as ordinary income, rather than capital gains, wouldn't you start each year withdrawing from that until you get to the higher tax bracket (currently a jump from 12-22%), then withdraw what you need for the rest of the year from your tax free account? And if it's ordinary income, rather than capital gains, which account are you starting with at that 0% rate (which appears to be on the long-term capital gains schedule)?
It’s just basic capital gains brackets math with the addition of the standard deduction. MFJ is at 0% LTC on the first $89,250 of LTC. Then add the standard deduction.
Please note. If you can't swim, try not to dive into the deep end. To retire, you better either have a pension with SS or $500,000 in savings. To retire, you can't have a mortgage, a car note, or a big credit card bill! Oh, medical insurance is a must!
It actually depends on your retirement income and investments. A mortgage or a car note in retirement is no different than at any time in one's life. If those fit within your budget no issue. A big credit card balance is a NO NO at any time.
@jerrylundegaard2592 NO, it is not the same. First, working a regular decent job, you could look forward to a raise. Next, if you don't like the job, you go to another one. In retirement, seldom do you see a decent raise. Also, if you want to quit retirement, it doesn't usually work unless you die.
@@johncipolletti5611 You MISS the point. Reading comprehension difficult? I did not suggest everyone who is retired is able to have a mortgage, a car note or a credit card balance. I said it depends on the retirees income, investments and expenses. As with most things, it depends. Seriously, if a retiree has a good retirement income, investments and manageable expenses why would they want to quit retirement or find a job?
@@johncipolletti5611 Does not change the fact you MISSED the point. And we all know "advance degrees" mean nothing when it come to intelligence or common sense.
Something else to consider is inherited IRAs. Obviously not many people have them, but it can ruin a good plan, especially if you’re not Medicare age and using ACA.
Hi Kevin @foundryfinancial I appreciate your content. I teach Personal Finance at the Bauer College of Business at University of Houston and was hoping to get your permission to use your videos in my course. I have been teaching since 2012 and one of my favorite lessons is the 3 Bucket Strategy, its really just and introduction to Tax-Advantaged Investing. Your video goes deeper than mine and I wanted to share your videos with my advanced students and also those who are now well into their careers. keep up the great work, my friend!
70yo ~ $2k/mo living expenses - excludes travel, car purchase/repair & similar major infrequent expenses. Always frugal, self-sufficient… bought old house, did (do) own repairs/renovation, not big on ‘trinkets’, etc. 20yo car.
@@gr8dvd you could go to Hawaii once a month, buy a new car a year, get a new furnace and AC system a year, a new roof every other year and still come up well short of 10k a month. Living in the SF east bay, my recurring monthly exp. are around 2.5k a month. I don't know what I'd do if I had a extra 7.5k a month to spend on, be nice though. Lol
I don't understand why you want to pull from taxable before tax-deferred. If my taxable investments are low-dividend and/or qualified-dividend paying, withdrawals will be at LTCG rates, and some could even be tax-free (interest from in-state muni bonds), whereas all withdrawals from tax-deferred accounts will be at ordinary income rates. Withdrawing from tax-deferred first will preserve the lower-tax investments for as long as possible and reduce the impact of RMDs later. So at the moment I'm thinking of using taxable for low-dividend growth investing and muni bond investments and withdrawing in the following order: dividends and interest from taxable investments, tax-deferred investments, capital from taxable investments, and last tax-free investments. Some taxable money could also be used to fund Roth conversions.
Just depends on your long term goals and goals. Often your strategy is exactly right. Honestly, in this video I just wanted to show people the impact of getting this right and give them a tool to model it. This is why online calculators and one size fit all proclamations never work. And honestly, why I still have a job. Some clients will touch almost none of their taxable or their tax-feee accounts
I'm 62 and retired. I'm pulling $100,000 from my taxable account in 2024. My capital gain will be about $18,000 and taxed at 0% federal. I'm also doing a $29,000 401K to Roth rollover, which will be taxed at 10.6% federal. If I withdrew the $100,000 from my 401K, I'd be taxed at 22% federal, which is $22,000. I'm getting $100,000 from my taxable account for $0. Starting in 2024, my plan is to never be in the 22%/25% tax brackets again. I'll complete my 401K to Roth conversions by 12/31/25, as I'm assuming tax rates will increase on 1/1/26. Withdrawing $100,000 for my living expenses from my taxable account, was optimal for me. I've been doing Roth conversions since 2015, thus, I've already got my 401K balance reduced quite a bit. Completing my Roth conversions is my highest priority, as my tax rate avoided on Roth withdrawals will be 45% (Federal, State, IRMAA & NIIT). Withdrawing the $100,000 from my 401K would have increased my adjusted gross income by $100,000, while withdrawing $100,000 from my taxable account only increased my adjusted gross income by $18,000. I would have been UNABLE to do a 2024 Roth conversion, had I withdrew the $100,000 from my 401K. Nothing beats a Roth IRA, filled with low cost index stock funds. The key feature of my ability to do Roth conversions, at an average 13.2% tax rate was receiving some cash, via inheritance and a cash-out refinanced mortgage.
What is your strategy for deciding what account to pull from?
Hey Kevin If I have 2 million in my Trust account at RBC can I withdraw around 100 K a year since at my age 70 i have around another 15 or some more years since life expectancy is 85?
That doesn’t account for inflation. And also expected life expectancy and actual life expectancy aren’t always the same.
May I ask where that calculator is?
I retired last June. I have a Rollover IRA, a Roth IRA and a taxable brokerage account. I've been living off of my taxable brokerage account, which I expect to do until I collect Social Security. I'm also doing Roth conversions this year, filling up the 10% and 12% tax brackets. I've done about $30,000 in conversions so far this year and will wait to see what room I might have left at the end of the year. I'd like to avoid pushing my LTCG into the 15% bracket. We shall see.
Moving to a cheaper country. Will live off cash for 4 yrs. Then we'll get social security and pull from taxable account first
Invest judiciously, keep a stop loss figure. Shuffle between debt and equity wherever the ratio goes too off your target. As for the target, I recommend a Ratio like this Debt % should be equal to your age in years. If you are 20, debt is 20%, reset in equity. If the market falls or rises drastically, your debt % will change, which you should rebalance to 20% and bring back equity to 80%. Thus you would have bought low or booked profit depending on if it was a crash or a bull run.
Effective personal finance management is more important than the amount of money saved, regardless of whether income is earned through job or investment. Individuals can seek counsel from a certified financial advisor to optimize financial outcomes, who can provide specialized advice and methods to decrease expenses and maximize income.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
@@Jeffcraparo This is really nice. I worry that I have a couple more years before retirement, and I want to switch to using a financial advisor, I could really use the expertise of this advsors.
One of the most well-known people in her field is my CFA, Annette Marie Holt. I advise doing more study on her qualifications. She is a great resource for anybody trying to understand the financial industry because of her many years of expertise.
I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an email shortly.
I have been retired for five years now. Although I've been adhering to the 4% rule, things are challenging as I did not anticipate. 30% of the $600K I invested in st0cks is lost to the market. How can I diversify my portfolio for retirement
Now you are retired and depend on your investment, it’s best you redistribute your capital. To simplify the process, you could allocate your resources with the help of a financial advisor.
I wish I could have retired in my 50's. I'm 65 now, I started investing late . After some research, I found a strategy that helped. I'm pleased to say I'm retiring with at least $2 million.
Can you share details of your advisor? I want to invest my increased cash flow in stocks and alternative assets to achieve financial goals.
Her name is Annette Christine Conte can't divulge much. Most likely, the internet should have her basic info, you can research if you like
Thank you for this Pointer. It was easy to find your handler, She seems very proficient and flexible. I booked a call session with her.
The most common investment portfolio strategies include diversification, where you spread investments across different asset classes to manage risk. Another is the growth strategy, focused on capital appreciation through high-risk, high-reward assets. Income-oriented strategies target regular income from dividend stocks or bonds. There's also the value strategy, seeking undervalued assets for potential long-term gains.
My portfolio was diversified across several markets with the help of a financial planner, and were able to achieve over half a mil in net profit. It is vital that you have a variety of exposure, including in firms that are currently generating cash flows.
Could you possibly recommend a FA you've consulted with?
‘Grace Lorraine Austin’, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
My portfolio is diversified across several sectors, thanks to a financial advisor. With their expertise, I’ve achieved over $500,000 in net profits. Having exposure to cash-flow-positive companies is crucial for long-term success.
How much interest can I make on 500k? thinking of going into stock !
The time it takes to turn $500,000 into $1 million depends on your investment strategy and the rate of return. . If you put it in a high-yield savings account you'd earn $100,000 per month with a good financior planner. However, if you invest it in the stock market, which has historically returned , you could potentially make around $250,000 per month still depending on your market and risk taking strategy. So you need a good investment plan to earn well for a short period of time.
Amazing question, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
@@SamsonsRhodesas I’ve been forced to find additional sources of income as I got retrenched. I barely have time to continue trading and watch my investments since I had my second daughter. Do you think I should take a break for a while from the market and focus on other things or return whenever I have free time or is it a continuous process? Thanks...
Taking break may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. A licensed adviser whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help...
Taking break may not be the best approach if you ask me. This is where an AI comes into the picture. I barely have time to trade myself as my job swallows up most of my time. A licensed adviser whom has made me over 5 figures in profit in less than seven months, handles my investments. I could leave you a lead if you need help
A friend died last month at 64 and collected $0 from retirement and SSN. Never retired. Always seems questionable to miss out on 10 years SSN as you bet you’ll live to 70. My wife died at 50. Neither of my parents lived past 65. We don’t all live forever.
I understand there’s math involved but seems that using SSN earlier uses “other people’s money” such as the governments payments to you v drawing down more of you so called own money in your retirement accounts. Though it’s clear it’s not “your money” because unless you spend it all you never use what you saved all your life - it’s for your heirs then.
I thought about how to reply to your comment, but couldn’t figure out how to say in a brief way. So, I’ll leave you with some of my own thoughts/experiences and hope that all who read them will balance what is in their best interests. I to had a friend who passed away a year before retirement and never got to see a penny. I also lost my high school sweetheart, who was killed at 16 years old and before she could save a penny. I also had a grandmother who lived to 101. So, I guess as is good prudence with many things. Hope for the best, plan for the worst. Or; live for today, but not at the expense of tomorrow. Best wishes.
I agree. I know it is better to wait until 70 but I’m gonna take SS the moment I can because we don’t know when this ride ends
Family history says I most likely won't live long enough to collect SS. I'm going to get every cent I can while I can.
I’m from a family without longevity also. I’m collecting as soon as I am eligible and spending the rest of my life with my grandchildren.
I agree on this. Social Security is use it or loose it. If you wait and don't take it you aren't going to be leaving it to someone to inherit like other payment sources. There is a break even age and other assets will continue to grow if you are taking and using Social Security instead of drawing from them.
The ROTH is the last thing you should draw from in my opinion. The money you take out is tax free, yes, BUT once it is out of the account it can no longer be returned, and that money was _earning_ money (presumably) which would have been tax free.
If you have an insurance gap and are affordable care act you can need tax free income. Otherwise you loose your subsidies.
You can withdraw just the dividends from your Roth also you ever read the book “die with zero”
@@Dividendsmattertoo Or, you can reinvest the dividends within the ROTH and the profits that result will also be tax free. Once dividends are taken out, though what is taken out CAN be reinvested outside the ROTH, the proceeds will be taxable. If one absolutely needs the dividends then by all means take it, but if not keeping it in is a no-brainer.
Yes the proceeds can be taxable if you take out your gains but if you only take out your contributions then they are tax free
Thanks, Kevin, for covering this information & especially for making your software available. I’m a retired MD,but know *nothing* about making good decisions regarding retirement. I will spend the remainder of the weekend viewing & learning from your videos & software. I was a pediatrician, the lowest paid MD, so my portfolio is quite modest. Consequently, I need all the help I can get! Thanks for educating this OG.
This was amazing, very informative on such an important topic. Thank you Kevin!
We opted to draw from our regular investment account first. We retired at 62 and were relying on ACA provisions for health insurance. By using our regular investment account it kept our Modified Adjusted Gross Income (MAGI) low. As a result our health insurance was highly subsidized and we had zero taxes. We figure we avoided close to $10k a year in health insurance and tax expenses for 3 years. We started income streams at age 65 in conjunction with Medicare coverage. We also made Roth conversions up to bracket creep starting at age 65 and will continue to do so until RMD age. These are the only transactions we've conducted with our IRAs.
I have wondered for many years, why it is that the American education system hasn't or doesn't teach finances, especially, early on (elementary school) and continued throughout HS. This is great info and if I may add, a great read is the (any) story about Alexander Hamilton and his story relating to treasury/financial system. An eye opener!
Seems someone wants us stupid, and poor.
My high school teaches financial literacy. Unfortunately a socialist teaches the course. I’ve spoken up many times about it but I’m talking to myself. Public education is a train wreck.
@@fattoria_di_bastoni
Sorry to hear that but it isn’t surprising.
One of my best friends is also a CFP and donates time teaching financial literacy at a local high school. But it's all on a volunteer basis.
@@fattoria_di_bastoni 🙄
There sems to be a focus here on minimizing the taxes rather than maximizing the after- tax wealth. The latter is to be preferred. It becomes rather complicated when considering the fact that wealth is inheritable and for some accounts you must consider your life expectancy and the tax rates of those inheriting your wealth.
He does mention the tax adjusted ending portfolio a few times in passing.
Minimizing taxes is what I need to do and why I watched this.
What you don't spend in taxes is re-invested and compounded thus "maximizing the after-tax wealth".
I think you missed the boat on someone who retires early. I retired at 61 1/2. I have 3 1/2 yrs until i can go on medicare. Healthcare is the number 1 thing i will not skimp on. Going through the ACA plans, the subsidies are tied to your gross income, this also includes your spouse. In order to get a decent policy under $500/month we had to cap our income at 40 grand. That means no roth conversions, no ira withdrawls. I planned this a few years ahead and stock piled enough cash to pay bills for 3 1/2 years.
So, sometimes one does not really have a choice. Btw, the policy without subsidies was $1325/month.
I also waited to retire until my wife hit 65 and went on medicare. She has a cancer history which is a whole other ball of wax.
My spouse and I decided to retire at 62. We knew we would incur an income monthly loss of $1000. We also knew we had to bridge our health insurance for 3 years. The ACA ( Obama Care) came to the rescue and so did Trump ( bless his heart). We had IRA's totally $600,000. Are income at retirement decreased from $110,000 to $45,000. We were not married at the time we retired. The ACA premium is based on individual income. Our premiums for the ACA was $75 monthly for me and $50 monthly for my partner. Then Trump was elected and his first act was eliminating the tax subsidy. By doing so, another subsidy kicked in..resulting in my premium falling to $50 monthly and my partner's to $25. Total coverage with a max out of pocket of $1700. Bless Trump's little heart. Lol
Anyway ..65 arrived ..partner and I celebrated our 25th anniversary by joining hands in marriage. We were met with Medicare..after contributing to Medicare since age of 18..Medicare premium was $165 monthly plus another $35 monthly for supplemental coverage. And out of pocket cost soared to $4000. EACH.
Long story short..our $600,000 is invested in a 6% government agency bond (.not callable for 6 months) we have always lived within our means. Home is mortgage free and any credit card debt to choose to carry is always with a zero interest card. .
We will have to begin RMD at age 72. The withdraw will simply be transferred to our joint non IRA account. One thing I noticed...when we withdrew $15 000 to cover cost of a new home ..our tax return for that year was zero..for both state and fed.
I truly hope your wife remains in remission and you both have many blissful years enjoying your hard earned retirement
@johnemanuele8695 At least you weren't forced to take a covid vaccine like I had to or lose your job under Biden (bless his new world order heart) remember they told you the vaccine will keep you from spreading covid and getting sick? Shut the economy down too. At least Trump (bless his 2nd term president November heart) let me dip into my 401k up to 100k.
@@johnemanuele8695 Trump is heartless. Get a clue
@@johnemanuele8695Uh, pretty sure Biden, bless his heart, raised the RMD age to 75. And Trump AND the Republicans tried to do away with Obamacare completely, except for the courage of John McCain, bless his heart! Now, if Project 2025 is allowed to be implemented, Trump elected that is, the Project 2025 stated goals is to do away with Medicare all together, and cut Social Security. Be careful what you wish for.
Current plan is to delay SS until 70 (longevity genes) and draw down/Roth convert from pretax from age 66 to 72, to reduce RMDs. Currently don't have any post tax $ beyond some operating cash for the next 6 months spending, but plan to sell a house soon. After RMD starts, plan to use Roth and brokerage whenever spending needs or wants go above what's prudent where tax brackets and IRMAA are concerned.
We pull from tax deferred accounts until we hit the spot where the 2nd level of IRRMA kicks in and then we pull the rest from ROTHs since that extra 4% the 2nd level of IRRMA cost essentially gives us 4% more on the ROTH. Not pulling a lot from the ROTH, but some.
This is invaluable info! Hope you do hourly consults. This is the missing piece to our retirement plan, along with protentional ROTH conversion.
I have dreamed of making more than $200,000 in income all my life and would not care getting hit with high tax rate but that dream never comes true, now that I have a chance in retirement to make that dream comes true without even working that is already a pretty good deal. I will just sleep through this tax issues and enjoy life then when I have time and I may do something about it with the information provided here, thank you Kevin
if you retire early you will need healthcare and the cap gains impact your aca magi income and hence your subsidy. fidelity offers a tax managed account the washes the gains out of the portfolio while tracking an index...helpful for income planning with regard to aca magi...healthcare cost is a huge factor when retiring early....
It’s called direct indexing. Lots of companies now offer it. And you’re right about healthcare costs being expensive.
I target and track my income in order to get the subsidy. Little extra planning but not too much.
Perfect topic. I'm 3 years in retirement @57, did a good job in the accumulation phase with net worth of $3M+. The problem is I haven't spent any of it despite knowing I have no concerns of running out of money. Some minimalist traits that helped me save are not easily cast aside. I sense I'll be dead and gone with plenty of money left behind, but that was never a goal.
It is hard to make the transition to withdrawing savings you’ve spent your working life accumulating. I’ve been retired 7 years and have withdrawn little, worked part time on and off (dont need to), and continue to grow the nest egg. 🤷♂️
@RicardaWindsheimermy financial advisor says this is very common with her clients: They are frugal, don’t travel a lot and enjoy where they live.
Shifting into “ enjoying” some of the money is something they have to give themselves permission to do.
It is best to have "more than enough", than "not enough".
@@bethensley9973 Americans aren't trained to enjoy their lives. We are trained to fear poverty and work until we drop dead.
Been using taxable accounts since I retired early. This will continue until I hit the RMD age. Then RMDs will exceed living expenses. Roths will likely never be touched. Will claim SS at 70. So between SS, small pension, and RMD, I am fine.
Knowing that your RMD will far exceed your living expenses seems like a reason to convert more before you need to take the RMDs
Use your Roths for major purchases (paying cash for a new car, a second home, etc.). This way you avoid selling from taxable accounts and driving up your taxable income.
I would withdraw from the tax deferred account first to fill up the 12% tax bracket every year, then the taxable account then the tax free account last if at all.
You are fortunate to already know at what age you will pass away and plan accordingly...Most people don't know.
Dad made sure to position things such that he got less in his lifetime but left mom in a position of getting more of social. She out lived him by almost 21 years. It’s not me I’m worried about, it’s my fiancée. So will make sure I can get by until she gets a better benefit.
What's your salary and what's hers. How much debt does she bring into the marriage.
Don't matter I have all tax free funds no taxes fir me forever starting next year feels so good
Congrats!
So ?
Interesting, but the figures are so far above where I think we will be that it lost relevance and I started tuning out. Perhaps you could do one like this for the common worker.
Same!
Agree, I turn off when this couple came in, their bank account get me all confused.
When he said the “typical family”!!! has 1.2 million………funny
Absolutely correct, but he is a certified financial planner, so generally the only people he deals with are people with money. I would venture to guess that he spends no time with someone that works at the local hardware store, who lives hand to mouth just hoping to reach full retirement to draw Social Security benefits that we are now hearing may be reduced by 20% to 30% beginning in 2033 because congress and the government is more interested in funding their war machine, and their pet projects than they are the livelihood and security of senior citizens that have paid into the system their entire working life.
Great retirement content, This is the precise guidance I've been searching for; the last piece of the puzzle for me. Thanks!
Honestly, this just scratches the surface - lots of variables. But, it helps you start down the right rabbit hole!
It is very complicated in retirement planning especially most of us aren't good in math. I am gonna try to the software you provide here and hope I can get some advice out of it. Thanks for sharing this tool.
I came across your channel through this video-case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.
Maybe I heard wrong, but around 7:10, I thought it was mentioned that if you put $20k into a 401k or 403b, it reduces your taxes by $20k. I believe it was meant to say that if you earn $70K a year, and you put $20K into your 401k or 403b, that your federal taxable wages are reduced by $20K and the fed taxes are calculated on the $50K. FICA I don't believe is affected by this. I could be wrong on what I heard.
Yeah, that’s what I meant to say. And FICA is not impacted. Although that’s only applicable on a certain amount of income.
Every time I lose or quit a full-time job, I always roll the money from the 401k to the appropriate brokerage account. I'm planning on pulling from tax-deferred first and only pulling when market conditions are good. The money would either go into a taxable brokerage account and/or a high-yield savings account to make safe interest. I would pull enough to cover 3 years worth of expenses. This should nearly eliminate sequence of returns risk (I hope). Then when that money runs out, I finally pull from the Roth.
You roll it over to an Ira? Or do you mean withdraw and pay tax and then but in brokerage acct?
Don’t you pay IRS 10% penalty if you withdraw from a qualified (tax deferred) acct before age 59 & 1/2??
@@cindyhenry1410Yes, if you withdraw before being eligible you are fined and taxed at existing rates. Rule of 55 can be used to withdraw earlier though, but it has catches.
I think the original comment meant he was rolling over employer tax deferred accounts when he changed jobs.
Why defer SS till 70 years old? Doesn't make sense with median death age is 73.4 years for a male. What is the best prorate sequence of withdrawal if SS is taken at 62 years and not left on the table unused? All tax and retirement advisors have convinced themselves their clients will never die.
If the male is healthy, it probably makes sense to wait until 70. Basically insurance incase he lives longer than he expects, as many people do.
Perhaps I'm more conservative with my money, but I'd rather have extra available incase I live longer, and if I die at 71, then another guy who lived until 91 can have it.
No one's telling you to defer SS until 70 if you think you'll die early. Do what you feel is best, as will we all.
@@BrittMFH All the youtube "financial experts" reproducing each others content for their channels are doing it.
So half the men live longer than 73.4. With a solid number living way longer than 73.4. Assess based on your own situation, but median age of death is a very limited stat to make this decision on.
@@wmarian5027 thanks Braniac🫡
This was a really helpful and clear lesson on tax strategy and withdrawal order. Thanks!
Very informative. Thanks for sharing. After a month of learning, I'm glad that I am able to understand the relating threads. Managing personal finance is rewarding.
remember that you can't take the money with you and you only have so many quality days on earth. retire as soon as you can make ends meet and NOT until the money looks better later. As soon as you can make ends meet, unless you like working then by all means keep working because you are funding my retirement (social security part) while your NOT draining it.
people who work until they die are my heros
This is why I’m focused on maximizing my ROTH accounts over a 401k.
True, but some people want the company match. It’s free money.
@@toddmaniatoddmania9844 Why not both?
I am not a financial adviser, or a tax professional and this is not financial or tax advice. My experience is that maxing my 401k was one of the larger mistakes I made. Here's what I wish I had done;
1) invest up to the company match in my 401k
2) max out my roth
3) max out an HSA when I qualify.
4) Invest the rest in a standard brokerage account. (this assumes you are a buy and hold type of investor, and that you do NOT have a ROTH 401k available)
Here's why;
1) The company match is worth the taxes you MIGHT have to pay.
2) ROTH is tax free at retirement, and can be used without penalties or taxes within limits before retirement.
3) You're gonna have health care expenses, and why not pay them tax free?
4) There is NO long term capital gains tax on your first $89,250 of GAINS PER YEAR (if you're married). This is MUCH better than a traditional 401k tax treatment.
So, during retirement, I'd draw nearly 30k per year from my traditional 401k. This would be tax free because of standard exemptions. Then, I'd take out about 60k of GAINS from my brokerage account that would also be tax free. If needed, I'd pull additional money from my ROTH, and of course pay my medical with the HSA. This gives me a tax free income in excess of 100k per year if I've made good investments.
@@toddmaniatoddmania9844 Most 401K plans have a ROTH option. I max out my 401K contributions every year and it is all with after tax dollars going into ROTH account.
some companies match pre or post tax deposits. I didn’t know that my company did, I could have switched to Roth much sooner
Thank you for this video, it answered some of my questions while prompting me to find additional answers to questions that were raised.
Everyone says that 401k is taxed like regular W2 income but you already paid FICA taxes so it’s not quite as bad as regular paychecks get taxed while working. Also, I may have missed it but you can have about $90k per year of long term capital gains as a couple before those are taxed. -update: you mentioned that at 12:27. 👍
I have a whole video on it. th-cam.com/video/ypmGuZ0g4q4/w-d-xo.htmlsi=ZHpRIrehiPHMWgoD
You are also no longer paying Medicare funds as you would in a paycheck....
The easy way to think about 401k taxes is just apply what your federal income tax bracket will be. If you are in the 12% bracket just deduct the standard deduction for single or married and tax the remaining amount you will withdraw from you 401k.
Example:
For 2023 standard deduction for single is $13,850 and $27,770 for married filing jointly. So assuming a $50k 401k withdrawal and filing jointly would be $50k - 27.7k, leaving $22.3k taxable.
Now look up what tax bracket $22.3k falls under, which for 2023 is the 12% bracket. Tax would be $2,676 in 2023 on a $50k 401k withdrawal with no other tax deductions considered.
So a withdrawal of $50k from your 401k in 2023 would net you $47,324 after federal taxes and no state income tax.
Also, the current tax brackets and deductions are all set to sunset the end of 2025 and return to what they were previously. The only portion of the Trump tax cuts which will remain are the corporate/wealthy tax cut portions. For my example above that will mean the 12% bracket will be reverting to the 15% bracket with far less standard deductions and other deductions available. Or to put it simply, unless Congress extends the current tax laws taxes will be rising for individuals starting in 2026.
Great content, thank you Kevin!
Thank you!
I love how much details are available nowadays for retirement planning and financial literacy in general. 13:45 is where my strategy would reside too. Taxable-Tax deferred and then Tax free accounts withdrawals. Love this detailed analysis!
Thanks for the great videos and the link!
The hole I see is if you don't keep a rainy day fund when you need it then you may be pulling funds out at a loss when the market is down.
Of course, this one video is not meant to be a financial plan.
The short way to reference the scenario you described is “sequence of returns risk”.
It’s too easy. At all time highs increase your cash buffer to the point it’ll see you through without withdrawals.
@@bryan_witha_whyy so, how do you increase your buffer without selling off your shares? Where dividends come even if the market is up or down. Also, if you plan right and buy those shares that have good dividend growth your money will grow over time. My 3 uncles worked blue-collar jobs. All retired rich with good blue chip stocks that paid good dividends. They lived off the dividends way into retirement.
This video is outstanding. Great, thorough analysis. Thank you.
When I leave a job I have the 401K company rollover my 401k to a Traditional IRA. IMPORTANT I had NO CHECKS sent to me, it is the 401k company that sent the check to the brokerage company. I never saw or touched the money transfer for tax reasons.
The 401k company charges yearly fees in addition to the mutual fund fees. Good brokerages only charge mutual fund fees.
The company you worked for *MIGHT* have paid your 401k fees, but they probably won't pay after you leave the company.
The only drawback is that I cannot be sued for any money in my 401k, but I can be sued for brokerage funds. So I don't do anything to get sued & have adequate Home Liability, Automobike and additional Umbrella Insurance.
You are missing out the fact that the dividends and interest from taxable account is taxable as regular income. That should be factored in while determining how much Roth conversion is possible.
Isn't that taxed a long-term capital gains (15%) if you've held for the required minimum number of yrs more (5 yrs?)? Your comment above applies if someone sells/withdraws before that.
I retired at 55 so I have access to my 403B without the 10# penalty. I take 50% from 403B and 50% from my brokerage account.. the last account I would touch is my Roth IRA
The rule of 55 always any one to retire and pull from their 401k without penalty
When retired, I won't be pulling $100,000 a year out of my 401 and get taxed 30%. Most people would be broke in 2 years or less. I'm in a 30% tax bracket while working and I will be in a 12% + or - tax bracket while retired. So to me, a 401, tax deferred and matched, is the best route.
Getting ready to retire with only taxes on my home insurance on my cars and electric bill and phone bill. I don’t understand these examples of 10k expenses a month
😂! Phil and Clare Dunphy. BEST. SHOW. EVER.
Investing has been rather rewarding to me and I've learned that getting a good return is very much attainable if you know your way around it. Do not let anyone tell you it’s impossible.
How are you able to do it? Not everyone is as lucky as you know.
How are you doing it? Not everyone is as lucky as you are you know.
Luck is way off the picture. Jonas Herman, a licensed fiduciary is the brain behind my success. I've gotten into a plethora of assets with $21k spread across stocks (options and futures) for the short term and Roth IRA, index funds, cryptocurrency and ETFs, for the long term. Now with over 91k in roi, I sit back and just reinvest at intervals while I handle my other businesses.
Is he taking new clients? I'll be 56 soon I hope it's not too late. This whole stuff is just too complicated for me. I don't mind using some help.
Hermanw jonas that’s his gmail okay
THis was exactly what I was looking for. Tax repercussions! I grew up in Silver Lake! I saw you are around the corner!
Subscribed 🙂 I've downloaded and played with the tool (so thanks for that) and compared it to the Fidelity retirement calculator I've used the past 5 years or so. The tax (and Roth conversion) information in this tool is non-existent in the Fidelity tool ( my guess is on purpose) but their income and expense details are so much more comprehensive allowing you to add or change particular items and amounts on a year by year basis. Looks like I'll be using both tools now until I find the 'one tool to rule them all' (haha, sorry about the poor dad joke). I've been early retired (55) coming up on two years and am still trying to navigate the nuances of budgeting and optimization until my wife retires around the end of the year. I've watched about 3 or 4 of your video's and realize you're definitely in the top 3 of the dozen or so I've watched or seen over the years. Keep up the great content.
How long did you have access to the tool? I was logged in yesterday, but won't let me log in today.
@@MrRiedemanJACC Saw your note so I just tried to log in... I'm in, no issues. Must be something on your end.
@@azwileetoyote thanks for letting me know!!
Can you share a link to the tool? I don't see it posted in the video description! Thanks!
Is the tool still available for downloading? I cannot seem to find the link to download. Could you please send the link? Thank you.
Thank you! Your visuals (the tables) really help! Liked & subscribed!
I have pension here pays all my bills. When I turn 62 I will start getting my SSA. I have Tricare, Dental and Vision.
You didn't really give an answer, but it seems that best strategy would be to pull money from the IRA or 401K UP TO the point where it would kick you up a tax bracket and spread that out as far as possible. That tax bracket can eat up a LOT of what you will gain.
You sound very knowledgeable and strategic and this seems like sound advice. You also seem out of touch in terms of being relatable. The “typical” family does not have $1M saved for retirement. The “average” retiree does not collect $4K per month. Try cutting those numbers in half, and then some.
He is knowledgeable and strategic. And this IS sound advice. Not out of touch at all - these are from the people he works with who have funds and need to understand how to use them. Anyone with much less does not have too be as concerned because their taxable situation is far less problematic. I find it to be highly honest, and he is sharing terrific info. Know your audience. And also, audience: know your speaker.
@@kelleydonovan770
he used imprecice language ... you don't get a "deduction" for tax deferred contributions as it is not counted as income in the first place
Phil & Claire are my favorite Dunphy's. They sound like a really modern family. ;-)
I know them as well. I’m concerned this guys doesn’t know them. They met in college. No way they have a 7 year age difference.
Just a slight correction... Putting 20K into a 401K doesn't reduce taxes by 20K it reduces your taxable income by 20K (6:57). You probably meant this, but it didn't come out that way.
You’re correct. I should have been more precise.
Thank you for a great video with the couple's examples. Of course, everyone situation is different, but this gives enough information to build a better financial future. I will be checking out your other videos to get a full understanding of getting ready for the dreaded RMDs . I will start with your software tool and see where I stand and work the process.
At around minute 12:45, in reality the tax brackets are adjusted yearly which allows retirees to take higher distributions without moving to a higher tax bracket. For example, a couple in 2023 filing jointly can withdraw up to $89,450 in taxable income (401k for example) and remain in the 12% tax rate whereas in 2024 they can take up to $94,300 (almost a 6% increase).
I guess if I were retired today, I would strategically give myself and spouse a raise up to the IRS adjusted bracket only to avoid moving to the third tax bracket- 22%!
Why wouldn't you draw from your IRA first and reduce that account and in turn reduce the RMD required when you hit 73, then use your taxable, RMD's and SS to fund your retirement. It seems like anything you can do to reduce your RMD's will help later in retirement. I'd like to see those numbers.
What is RMD?
@@rhondaodden4286 Required Minimum Distribution that begins at 73 or later.
If you can stay in a lower tax bracket, then you have the correct strategy.
@@tncoltsfan what is RMD?
@@rhondaodden4286 required minimum distribution
Looking forward to the Roth conversion topic
Great video - thanks for the Right Capital access. I'll be interested to see how it compares to New Retirement (now Boldin)
Regarding the frequent discussion on at what age should you start taking social security, how do you take the more likely future reduction in payments resulting from no longer having a surplus in reserve, into a presentation format? As a recently retired accountant, I took this into account in my analysis and it changed the logical choice. Results will be impacted by what year, how much will the reduction be, and what possible regulation legislation will become the final rule.
You said to take from your taxable account first, then from your tax deferred account. But if you’re 73 don’t you have to start withdrawing?
$10k expenses per month? Whoa-- way too many expenses! Time to downsize. I don't think you are talking about regular people like myself. I'm a teacher and for sure I don't make that much.
Clearly you don’t live on the coast. :)
2 grand a month for the wife and I. House and cars all paid for..retire in 3 years, can’t wait. Good luck all.
10k a month must mean you still have your kids living with you. Where are the numbers for regular folk?
@@foundryfinancial10k per month is not middle class, that is for certain. It amuses me that people like you think 10k per month is "average", coast or not.
@@absurdnerd7624💯
I just saw sone other video showing breakeven period for starting social security benefit at age 62 vs age 70 . The breakeven age was 79 years. This surprises me that after age 80 you won’t be able to spend money with your health even if you have lot of money. With the crazy inflation, the breakeven period will even get pushed back. Considering average life expectancy of 83-84 years, it doesn’t make sense to push back social security benefit past age 65.
This is often the case. Most people don’t calculate break even which is a real mistake - I was an accounting professor and covered the importance of break even in my managerial accounting course.
I think people get so worried that they will live beyond the average life expectancy, they get scared into delaying withdraw.
I did a break even analysis for my pension plan and I would have to live to 90 before break even. It made it a no brainer to start taking it at 55.
The best thing to do is: retire with your pension, make sure that your house is paid off - along with the cars, go back and work in your field for fun money and nonessentials. Do not touch your TSA’s until 70. Never rely on social security- that is a bonus.
Not really explained why the order makes this difference, only that it does.
In particular, the specific explanation of why Roth should be last is not a reason at all. The likely reason is that deferred accounts will have forced RMDs.
I suspect that the speaker may not fully understand the reason too, which does not instill confidence at his advice.
Started working with the Right Capitol program, getting familiar with it by changing the inputs (as I dont know all the finance lingo). After several hours I have it matching fairly closely to my Excel workbook. Going to start working with adding Roth Conversions for the next two years and see what happens with my very low taxes..... It is a powerful tool, thanks for sharing.
Of course. Glad it was helpful
@@foundryfinancial I clicked on the links but didn't get or see how to download the program. I did get an email, but no program. How do I get the program?
Glad I found you’re channel, thanks
Dont wait to reduce your traditional IRA, convert or get the IRA lower before your get old. There are old age traps in a traditional IRA you cant afford.
The ACA is based on your gross income, so 🤦🏻♀️ I had to pay for it completely without subsidies. 🤷🏻♀️ What can you do?
I decided I can afford it if I don’t buy anything except for groceries and decided to sell some stuff. So I went ahead and paid for it. Healthcare is too expensive to go without insurance.
What you can sometimes do is put as much as possible into a traditional IRA or 401k plan to reduce your taxable Income. I myself (self employed) set up a Solo 401k plan to contribute much more than the IRA contribution limit. It increased my ACA plan subsidy, as well as reduced my Silver plan deductible and co-pays.
In the example shown....the couple draws from a taxable LTG account....there are 2 other columns that show their qualified acct & tax free act gaining wealth.....what are those gains based on (average 5% stock market??) gains in any account are never guaranteed! Please comment on these accounts and their value....TYFS!
Is 1.4mm really the normal portfolio for the average retiring American family? If so, I really messed up somewhere 😢.
Yeah, most of us cannot relate to that at all. I think he used a ridiculous example.
Kevin, the Right Capital tool has incorrect tax numbers. My scenario has me selling about 12% of my stocks annually which is obviously not sustainable itself. The sale created a large tax bill also.
One important take from this should be that if you wait to draw from your IRA until much later in retirement, you'll potentially be paying a much higher margin tax rate on those withdrawals. It may be better to rollover to Roth or draw as income IRA to avoid drawing funds from your taxable account that may have large unrealized capital gains. If you plan to pass on assets to heirs, that may be important. Also if you're in a community property state, one one spouse passes , there is a complete basis step up (as opposed to half in other states). Note that withdrawing IRA funds at x% tax rate is exactly the same as letting the assets grow tax free and then withdrawing at the same x% tax rate.
Or possibly lower tax rates. It’s a coin toss.
Please explain exactly how we download your software. thank you.
At 12:24 you've mentioned that married filers can pull out $100k per year fed tax free provided no other income is realized. Does this income include dividends from brokerage accounts and bank interest or only income from wages salaries and tips?
He answered another person's question regarding the $100k tax free. What he's talking about is their Taxable Income would be $100k less Standard Deduction of about $27.7k (below aged 65, 2023 amount). Taxable Income $72.3k. At that level, they're in a 12% tax bracket for ordinary income. But LTCG at that level are taxed at 0%. This doesn't apply if the $100k is wages or a Traditional IRA or 401k w/d. Those are taxed at Ordinary Income rate.
thanks for your high quality content
Originally, I'd planned to wait until 70 to collect SSI. Had a change of heart and began at 63. Two years later, the big "C" arrives.
Hello @Kevin Lum - you mention at 12:30 that withdrawals from taxable account are free of capital gains tax up to 100k if there is no other income. Can you pl. share an article or site that explains this rule in more detail? Thank you
If you're in either the 10% or most of the 12% tax bracket for ordinary income purposes, the tax rate you pay on LTCG and Qualified Dividends is 0%. In simple terms, that a Single person with Taxable Income below about $44k or Married Couple below about $89k.
I don't have a gap. I only spend 30% of my fixed income and invest 70% but I also get interest income from bank CDs and RMDs that I use QCDs to negate.. I don't pay taxes Fed, State, and Property Taxes. I use my negative gap to make Roth conversions so I'm rapidly knocking the RMDs down. Over the next 5 years, my QCDs will be about the same as I give to charity anyway and I' will about halved my rollover IRA. After 5 years, I'll recalculate. The only downside is I have to do my taxes for 2024 as an estimate to manage my future tax liability (recheck Dec1) and also file my taxes for 2023 too. I do my own taxes.
Kevin - your videos are excellent; well explained and full of common sense. Thanks so much.
Thanks, Brian! I really appreciate it.
Hi Kevin, great content as always! I am looking for the link of that tool you shared in the video but did not find. Could you please post the link again? Thank you.
foundryfinancial.typeform.com/rightcapital
FERS Pension, Social Security, part time work and been stacking Bitcoin
When did you buy your first Bitcoin?
@foundryfinancial started 4 years ago stacking on a pension so slow going. Now with ETFs every one can participate.
@@williamwatson6676it will make it much easier. Also, the Blackrock ETF is very economical.
@foundryfinancial I'm a Fidelity guy. (FBTC) They been in digital assets awhile and only ones doing their own custody so I feel bit better about that.
This is very helpful for us. Thank you so much.
I'm pulling 401k pretax first at age 55 with IRS rule of 55 to reduce RMDs and to have taxable income for Obamacare subsidies. My RMD age is 75 years old. I don't ever plan to spend a dime out of my Roth IRA, that's for my kid's inheritance, and that dumb secure act with 10 years of forced withdrawals.
Awsome, life is too short to retire in the 60s if it can be avoided.
Retired at 50 several years ago, was going to take social security at 62 but factoring in RMDs at 75, probably use pretax accounts and delay social security as well.
The more I learn, the more I earn 😂
I'm doing the same thing in a year. Spending it down to near zero, then living off some cash and real estate after that. Then Roth IRA if necessary. But the Roth is an "in case SHTF" fund and inheritance/gifting.
Roth IRA goes to heirs tax free....their are no RMDs on it.....
I'm not gifting anything unless I happen to have anything left.
@@cindyhenry1410 Secure Act requires RMDs for inherited Roths.
For most people there is only a gap if you choose to stay in the US. Living overseas and my total monthly expenses are less than $1000.
One more thing is the impact of changing tax rates. It’s unlikely to impact your approach as taxes will almost certainly increase in the future.
With a new administration coming in and many existing individual tax laws set to expire at the end of 2025, I think most of us in the industry expect to see new tax law passed in 2025.
i loveee Modern Family! loved the mention as your couple. 😂
Question: It looks like these examples empty one bucket at a time completely... If 401k growth withdrawals count as ordinary income, rather than capital gains, wouldn't you start each year withdrawing from that until you get to the higher tax bracket (currently a jump from 12-22%), then withdraw what you need for the rest of the year from your tax free account?
And if it's ordinary income, rather than capital gains, which account are you starting with at that 0% rate (which appears to be on the long-term capital gains schedule)?
Thank you and appreciate the link.
I can't find any information on the $100,000 annual capital gains exemption that you mention at 12:15. Can you help me out? Thanks.
It’s just basic capital gains brackets math with the addition of the standard deduction. MFJ is at 0% LTC on the first $89,250 of LTC. Then add the standard deduction.
@@foundryfinancial Got it. Thanks.
Great, so this videos is for people with over a Million in savings and investments.... I must be one of the very few that fall below that....
🙀
Thank you for sharing this info☀️☀️☀️
I only have a 401k and my personal savings account. I don't have an IRA or Roth.
i will suggest you diversify your income to make x2
work with my F.A Laura Grace Abels
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
You might see your employer offer a ROTH 401k in the future.
So informative! If I want to retire early in about 4 years should I start converting my Roth conversion now?
Please note. If you can't swim, try not to dive into the deep end.
To retire, you better either have a pension with SS or $500,000 in savings. To retire, you can't have a mortgage, a car note, or a big credit card bill! Oh, medical insurance is a must!
It actually depends on your retirement income and investments. A mortgage or a car note in retirement is no different than at any time in one's life. If those fit within your budget no issue.
A big credit card balance is a NO NO at any time.
@jerrylundegaard2592 NO, it is not the same. First, working a regular decent job, you could look forward to a raise. Next, if you don't like the job, you go to another one. In retirement, seldom do you see a decent raise. Also, if you want to quit retirement, it doesn't usually work unless you die.
@@johncipolletti5611 You MISS the point. Reading comprehension difficult?
I did not suggest everyone who is retired is able to have a mortgage, a car note or a credit card balance. I said it depends on the retirees income, investments and expenses.
As with most things, it depends.
Seriously, if a retiree has a good retirement income, investments and manageable expenses why would they want to quit retirement or find a job?
@jerrylundegaard2592 Funny how you say this to a teacher of 30 years with advance degrees.
@@johncipolletti5611 Does not change the fact you MISSED the point. And we all know "advance degrees" mean nothing when it come to intelligence or common sense.
Something else to consider is inherited IRAs. Obviously not many people have them, but it can ruin a good plan, especially if you’re not Medicare age and using ACA.
Great point!
I had an Inherited IRA starting 11 years ago. I often just used the RMD's each year to contribute more to my regular retirement funds.
Hi Kevin @foundryfinancial I appreciate your content. I teach Personal Finance at the Bauer College of Business at University of Houston and was hoping to get your permission to use your videos in my course. I have been teaching since 2012 and one of my favorite lessons is the 3 Bucket Strategy, its really just and introduction to Tax-Advantaged Investing. Your video goes deeper than mine and I wanted to share your videos with my advanced students and also those who are now well into their careers. keep up the great work, my friend!
Who here is over 60 years old and has 10k in monthly payments? Be curious to know, i must live ultra ultra frugally!!
I'm not in "ultra frugality" but my monthly needs are about half of that.
70yo ~ $2k/mo living expenses - excludes travel, car purchase/repair & similar major infrequent expenses. Always frugal, self-sufficient… bought old house, did (do) own repairs/renovation, not big on ‘trinkets’, etc. 20yo car.
I figured that had something to do with what they made a year and living in California.
@@gr8dvd you could go to Hawaii once a month, buy a new car a year, get a new furnace and AC system a year, a new roof every other year and still come up well short of 10k a month.
Living in the SF east bay, my recurring monthly exp. are around 2.5k a month.
I don't know what I'd do if I had a extra 7.5k a month to spend on, be nice though. Lol
Just turned 60, travel a LOT but still don't spend $10k a month unless we are doing home renovations...
What does "Pro rata" mean. when comparing to "Taxable, tax deferred, tax free"
NVM. Missed it watching "2X speed"... Pro rata means equal amount from each bucket
I don't understand why you want to pull from taxable before tax-deferred. If my taxable investments are low-dividend and/or qualified-dividend paying, withdrawals will be at LTCG rates, and some could even be tax-free (interest from in-state muni bonds), whereas all withdrawals from tax-deferred accounts will be at ordinary income rates. Withdrawing from tax-deferred first will preserve the lower-tax investments for as long as possible and reduce the impact of RMDs later. So at the moment I'm thinking of using taxable for low-dividend growth investing and muni bond investments and withdrawing in the following order: dividends and interest from taxable investments, tax-deferred investments, capital from taxable investments, and last tax-free investments. Some taxable money could also be used to fund Roth conversions.
Just depends on your long term goals and goals. Often your strategy is exactly right. Honestly, in this video I just wanted to show people the impact of getting this right and give them a tool to model it. This is why online calculators and one size fit all proclamations never work. And honestly, why I still have a job. Some clients will touch almost none of their taxable or their tax-feee accounts
I'm 62 and retired. I'm pulling $100,000 from my taxable account in 2024. My capital gain will be about $18,000 and taxed at 0% federal. I'm also doing a $29,000 401K to Roth rollover, which will be taxed at 10.6% federal.
If I withdrew the $100,000 from my 401K, I'd be taxed at 22% federal, which is $22,000. I'm getting $100,000 from my taxable account for $0.
Starting in 2024, my plan is to never be in the 22%/25% tax brackets again. I'll complete my 401K to Roth conversions by 12/31/25, as I'm assuming tax rates will increase on 1/1/26.
Withdrawing $100,000 for my living expenses from my taxable account, was optimal for me. I've been doing Roth conversions since 2015, thus, I've already got my 401K balance reduced quite a bit.
Completing my Roth conversions is my highest priority, as my tax rate avoided on Roth withdrawals will be 45% (Federal, State, IRMAA & NIIT). Withdrawing the $100,000 from my 401K would have increased my adjusted gross income by $100,000, while withdrawing $100,000 from my taxable account only increased my adjusted gross income by $18,000. I would have been UNABLE to do a 2024 Roth conversion, had I withdrew the $100,000 from my 401K.
Nothing beats a Roth IRA, filled with low cost index stock funds.
The key feature of my ability to do Roth conversions, at an average 13.2% tax rate was receiving some cash, via inheritance and a cash-out refinanced mortgage.